By Addis Getatchew

ADDIS ABABA, Ethiopia

Ethiopia is largely an agrarian economy but the country is working hard to change this by upping its game in the textile sector.

Eighteen leading apparel and textile companies from the U.S., China, India, Sri Lanka and six local manufacturers have set up factories at an industrial park in Hawassa -- a lakeside resort city 170 kilometers south of the capital Addis Ababa.

Buoyed by medium term prospects for growth, the textile and apparel companies are all set to expand their operations.

The state-of-the-art park in the regional capital is part of Ethiopia’s second growth and transformation plan (GTP II).

Ethiopia with a young labor force of 45 million people has a huge potential in the manufacturing sector.

The annual manufacturing growth which is currently 25 percent, is projected to increase gross domestic product (GDP) fourfold and its share in exports to 50 percent.

Of the companies intent on tapping this potential is Chinese manufacturer JP Textile, that is currently expanding its production at the park.

“We are planning to inject $22 million and expand our production here,” Danny Leung, JP Textile general manager told Anadolu Agency.

"That would be doubling up our existing investment of $22 million," Leung said, pointing at the piles of machinery imported from China.

“The prospects of this country advancing to a medium level of industrialization is very much within sight.

“Ethiopia’s textile industry is picking up now and fast catching up with the likes of Vietnam, Indonesia, Cambodia and other Far East countries,” he said.

- The park

The Hawassa Industrial Park -- a trailblazer offering a model for five other industrial parks in the making -- has been designed to employ 60,000 people at full capacity to generate export revenue amounting to $1 billion.

It has 37 factory sheds and its own renewable electricity source. Spread over 1.3 million square meters, the park offers one-stop government services to ease what otherwise would have been a time taking procedure.

It also employs zero liquid discharge (ZLD) enabling it to recycle 90 percent of sewerage disposal.

The government also provides various incentives in the form of tax holidays, duty free imports of factory machinery and other equipment, and cheaper transportation of products to the port through a multibillion dollar electric railway line.

Despite that some challenges remain to be tackled.

Leung said problems related to foreign currency, raw materials sourcing and skilled human power are unresolved issues.

“We import cotton from China as the quality produced in Ethiopia does not meet the required standards,” he said, adding availability of best quality cotton from local sources could have reduced production cost.

While JP Textile is in the process of doubling production by the end of this year, Leung is not sure of getting skilled labor.

He said inexperienced labor may slowdown the company’s expansion bid as available workforce will need training.

“I am not complaining about this though, because I acknowledge that the country has embarked on industrialization only recently; so it is something to expect,” he said.

“When we started operations here, we sent 28 fresh graduates to China. All of them returned and they are the ones who are managing production lines,” he said, adding they will continue hands-on training.

The company currently produces 36,000 yards an hour while operating at 50-60 percent of its capacity.

- FDI growing despite unrest

The flow of foreign direct investment (FDI) stood at $2.2 billion in the country over the six months since last June, the Ethiopian Investment Commission said in a statement.

“The figure shows a 22 percent increase compared to the same period the previous year,” the commission said.

It attributed the rise in FDI to government and private industry parks.

Half a dozen government parks in the capital Addis Ababa, Jimma in Oromia region, Debre Berhan and Bahir Dar in Amhara region have either gone operational or are under construction.

Two private industry parks Huajian and George industrial parks have gone operational and they created employment for nearly 50,000 Ethiopians.

“The two private industries alone have brought a foreign currency earning amounting to $42 million in a period of six months,” the commission said.